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A crash course in changing the world.
"Mr Black Swan" has a radical view on money and finance - but it does not go down so well with the World Bank :-)
Nassim Taleb is a quantitative analyst with a long experience in finance. He is the author of a very successful book, The Black Swan, where he contends that most of the variability in the money world is concentrated in very few, very large events. They can't be predicted, or mitigated.
In 2009 he gave an iconoclastic talk at a World Bank conference on Markets and Crises: What Next and How? Former World Bank Senior Manager John Nellis (now principal at his own consultancy company) reports on the talk in a very funny, very exasperated post on the World Bank's own Private Sector Development Blog - which by the way I strongly recommend following. Here's an excerpt:
Well, the post is funny, but I think Mr. Nellis is not being completely fair here. "Abolish debt" is actually a proposal. It is very radical, but worth considering. Of course, it would wipe out 99% of the financial sector, but some people are seriously wondering what those guys are contributing to the common good anyway.
After all we are being asked to think outside the box here. Mr Taleb's proposal is WAY outside the box, so why is he not taken seriously? And this question hides another one, more momentous to EVOKE agents. Just how far outside the box are we supposed to think to make valuable contributions towards saving the world? Does Alchemy agree or disagree with Mr. Nellis?
Maybe Mr. Taleb should be playing EVOKE. :-)
In 2009 he gave an iconoclastic talk at a World Bank conference on Markets and Crises: What Next and How? Former World Bank Senior Manager John Nellis (now principal at his own consultancy company) reports on the talk in a very funny, very exasperated post on the World Bank's own Private Sector Development Blog - which by the way I strongly recommend following. Here's an excerpt:
Questions included "How should we go about reforming the regulatory system?" Answer: Don't try to reform it; scrap it. "But what should we do?” Answer: Abolish debt. All of the world's great religions agree; there should be no interest. "Did regulators make the crisis worse by their incompetence?" Not an area of interest to him; he is not concerned with minor tinkering with the system. Good-bye.
Well, the post is funny, but I think Mr. Nellis is not being completely fair here. "Abolish debt" is actually a proposal. It is very radical, but worth considering. Of course, it would wipe out 99% of the financial sector, but some people are seriously wondering what those guys are contributing to the common good anyway.
After all we are being asked to think outside the box here. Mr Taleb's proposal is WAY outside the box, so why is he not taken seriously? And this question hides another one, more momentous to EVOKE agents. Just how far outside the box are we supposed to think to make valuable contributions towards saving the world? Does Alchemy agree or disagree with Mr. Nellis?
Maybe Mr. Taleb should be playing EVOKE. :-)
Views: 64
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Comment by Alberto Cottica on April 3, 2010 at 10:52pm
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Ethan and. A.V., thanks for your comments. Well, it is radical, no doubt about it. Probably impossible to make happen, a bad idea. I'm just implying that people back at the WBank - just like we all - need to make up their mind as to what they want to do. Is thinking outside the box a good thing or a bad one? I would not want to think that the progressive attitude towards knowledge in EVOKE is just a decoy, while real decision makers would not consider anything outside Washington Consensus. That would not be completely fair on us. :-)
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Comment by Patricio Buenrostro-Gilhuys on April 3, 2010 at 11:09pm
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No debt, no interest rates . . . Now we are talking. This would really transform money and financial systems. Do you know what is the answer of Mr. Taleb when questioned about the risk a bank or organisation is taking when making a loan?
Talking about black swans imagine for a minute how would our financial systems react if one day a natural disaster or a group of hackers erased all the financial info, all the debts . . . How would our current system respond to such a shock?
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Comment by Radhika Darbari on April 4, 2010 at 3:01am
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Ethan's gratefully done the Network Credit I will add it to the excel sheet of note :-) For adding to Evoke Forever :+1 collaboration as well :-) Please take on challenge: http://www.urgentevoke.com/profiles/blogs/challenge-promote-evoke as well and post a blog getting word out there or promoting wh*** Evoke Forever and you'll get a extra +1 courage for taking on the challenge :-)
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Comment by Elastika on April 4, 2010 at 1:35pm
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The box itself, weather you think outside or in it, is already a limitation to your thinking :)
I think national debts in underdeveloped countries are already so big, that they are practically eternal. So in a way we are witnessing a new form of slavery. I'm definitely for abolishing debts of poor countries.
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Well, Elastika, that's not necessarily a bad thing. Limits are good for thought: they give you a focus, and boost creativity to work around them - which is why poets insist on writing within very precisely defined formats like sonnets, haikus or limericks.
I don't think Taleb is concerned with foreign debts in underdeveloped countries (though he is originally from Lebanon). The way I understand the post, he thinks even within-country lending agoinst interest in developed economies should be abolished. Credit cards, home mortgages, everything. I read the book, but he does not address this issue there.
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Comment by Starling on April 4, 2010 at 2:03pm
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Good work, Agent. It would be really interesting to see what a global 'Year of Jubilee' would look like.
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Comment by Mark Mulkerin on April 4, 2010 at 2:44pm
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With all due respect to Mr. Nellis, I'm not impressed with his blog about Mr. Taleb. I had the good fortune (having read both of his books) to hear Mr. Taleb talk to a room filled with bankers and stock brokers etc. and they just didn't get it.
If you look at Mr. Taleb's core message, it is that we are notoriously bad at predicting outlying events (Black Swans) - both good and bad though the good usually take longer to effect society. For example, computers - a good black swan - nobody would have predicted in the early days that they would be so ubiquitous. Bad black swan - 9/11. However, though we can't predict what the next blow to the system will be, we can predict that there will be one. (This is the point at which the bankers say - "Right, so nobody can predict it? What do you think it will be? Global pandemic? Comet strike? What do you predict." And at the event I went to, Taleb just folded his arms, shook his head, and waited for it to end.)
At the risk of misunderstanding Taleb, I believe his position is that you need an economic system and society that is resilient. Asking anyone to tell you how much you need in the bank to cover all future possibilities and what rules you need in place to protect yourself is a fools game. To the extent that debt, excess leverage, lack of transparency, corruption, and the idea that regulation will protect you makes the economy and social system fragile, they are damaging. In short, plan your finances as a person or a country like everything could go very badly tomorrow, because in all probability something will.
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@alberto: I agree, usually are people more effective, when having some limits, it helps to focus. but sometimes it's also useful to forget about the box ...
I'm not sure no interest loans in the developed economy would be good (for poor people maybe, but not for all the others). the problem is that people in "the global western society" spend more than they actually need and having credits without interests would probably result in even more consumption. that would probably result in even greater environmental damage (or debt).
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Mark, wow. For what it's worth, I agree with your interpretation of Mr. Taleb's thinking, and I think you explain it very clearly. But at the World Bank seminar in question, you see, he had a roomful of regulators, not bankers. Therefore the question was not "how much should we have in the bank?", but "how do we make a more resilient system?". So the answer was different. Banks can't make lending agianst interest illegal: in principle States can, though it would be very, very difficult.
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@Alberto - I wasn't able to access his talk, but I was just suggesting that whoever his audience was, they likely don't want to be told that most of what they are doing is fighting the last war, but again, I couldn't watch the original talk. I suspect that were he in a room full of religious people asking what prayers they should say he'd be equally iconoclastic.
Besides, the problem with regulation is that once you write a rule, a million smart people look for a way to game it. The question ought not be incentives and regulations but ethics and responsibility. If more bankers viewed it as their moral obligation to improve the human condition, things might look a bit different.
As for interest, isn't Islamic banking interest free so what happened to Dubai World ...
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